The State of the Organic Union:
A Look at Where We Are and How to Overcome Challenges and
Take Advantage of Opportunities for Future Growth
By Laura Batcha
Once familiar to only a small segment of the population, organic products have gone mainstream in recent years, gaining recognition both domestically and throughout the world.
To understand how U.S. organic product sales have grown to more than $20 billion a year and what steps will be needed to continue this momentum, the Organic Trade Association (OTA) conducted interviews and group feedback sessions with over 200 industry stakeholders. To do this, they incorporated SWOT analysis, a strategic planning method and research tool used by both prestigious academic organizations and Fortune 500 companies to evaluate the Strengths, Weaknesses, Opportunities and Threats directly related to a project, business—or, in this case, an industry—striving to meet its objectives for the future. Typically, strengths and weaknesses are drawn from an internal evaluation, while opportunities and threats represent external conditions. SWOT findings can be used to inform us of how we, the organic community, can go forward to meet our common objective of continuing the growth of the industry as a whole.
To help you put this tool to best use, we have included a cross-reference at the bottom of each section that connects possible strengths and weaknesses to coordinating threats and opportunities and vice versa. The strengths and weaknesses are discussed in the first section, followed by threats and opportunities in the second half. Please note that the information contained below is a summary of all the responses received, and therefore does not reflect the attitudes or opinions of any given individual or company. Instead, it is intended to provide an overview of the organic industry, as articulated by the collective voices of the stakeholders involved in this research.
STRENGTHS
When interviewees were asked what were the biggest strengths of the organic industry, several positives stood out including organic legislation, the verifiable USDA Organic seal, consumer demand and strong scientific research, including mounting research showing the benefit of organic versus conventional.
Organic Legislation
Prior to 2002, there were dozens of definitions of “organic” that would change from state to state, certifier to certifier. Then the Organic Foods Production Act (OFPA), enacted by Congress as part of the 1990 Farm Bill, made “organic” an official term—establishing nationally enforceable standards for the production and handling of foods labeled organic. After the U.S. Department of Agriculture (USDA) published a final rule in December 2000 outlining final provisions, these national organic standards were fully implemented in October 2002.
As such, national organic standards administered by USDA’s National Organic Program (NOP) set in place an enforceable system to protect consumers against mislabeling or fraud. To be sold as organic in the United States, both domestically produced and imported products must be certified by an agency accredited by USDA as meeting U.S. national organic standards (with the exemption of small farms under $5,000). In case of violations, there is a process in place for filing a complaint with NOP, which would investigate and, if needed, take enforcement action.
“The ‘USDA Organic’ seal which grew out of the implementation of the National Organic Program] dramatically increased consumer confidence in the term organic,” according to Bill Wolf, president of Wolf, DiMatteo + Associates, adding that it created more favorable conditions under which companies could enter and participate in the organic market.
Moreover, it helped establish the organic industry as one governed by rules, characterized by transparency, and committed to positive forward movement. Reflecting on the organic industry’s quest for national organic standards, under secretary for USDA’s Marketing and Regulatory Programs Bob Knight, speaking at OTA’s 2008 Policy Conference and Hill Visit Day, said, “It is rare that a group wants more regulation, more compliance, and more enforcement.”
Weaknesses: Consumer Confusion, Lack of Regulation in Emerging Categories
Threats: Opposing Voices • Opportunities: Consumer Education
Consumer Demand
Since the launch of national organic standards, awareness has spread more and more each year, leading to increased consumer demand of organic. According to the Organic Trade Association’s (OTA) 2007 Manufacturer Survey, the U.S. organic industry grew 21 percent in sales in 2006, and was forecast to experience 18 percent sales growth each year on average from 2007 through 2010.
In 2008, The Natural Marketing Institute (NMI) reported that 59 percent of households purchased organic products in 2007, up from 57 percent in 2006, with the number of core users increasing from 16 percent in 2006 to 18 percent in 2007. A 2008 study by The Hartman Group found that consumers are willing to pay a premium for organic products when they eat out. Entitled “Organic 2008: Topline Insights—Consumer Insights and Analysis in Action,” this study found that 73 percent of those surveyed were willing to pay more for organic items.
Although some reports have hinted that this growth is slowing a bit (such as the Hartman’s latest “2008 Many Faces of Organic”), the fact is that for over a decade now the sales organic food and beverages have been growing at double digits rates, tripling, if not quadrupling, the growth of conventional grocery sales. While it is expected that industries of all kinds will have their ups and downs, even in this time of economic recession, organic still continues to grow while other industries stagnate. As Cynthia Barstow, president of the marketing group Seed-to-Shelf notes, “Quality is still important to most consumers and organic often holds that halo. Health is still a top market driver in the grocery store, recession or not. Choices will presumably reflect a shortening of the grocery list instead of an overhaul.”
Threats: Competing Labels, Domestic Supply, Global Trade Barriers
Opportunities: New Farm Bill, Consumer Education, Price Gap Closing
A Verifiable Label
Today, food labeled as organic is verified by a third-party every step from seed to mouth and subjected to a multitude of requirements, standards and oversight at every level. As such, it’s arguably one of the strongest agricultural process claims in the history of the USDA.
As more eco-labels appear in the marketplace, it is the ‘organic’ label that can be held up as standing for verifiable practices. As OTA staffers Barbara Haumann and Holly Givens note in their contribution to Sustainability in the Food Industry (Blackwell Publishing), the organic label is the “gold standard” as it is the only government-regulated eco-label.
Weaknesses: Consumer Confusion, Lack of Regulation in Emerging Categories
Threats: Competing Labels • Opportunities: Consumer Education
Strong Scientific Research
Lending additional strength to the organic industry is a growing body of peer-reviewed scientific research that helps connect organic agricultural practices and the healthfulness of organic food.
Research is mounting that shows increased levels of nutrients, including antioxidants, in many organic fruits and vegetables. Most recently, for example, researchers at USDA and Rutgers University found that organically cultivated blueberries had significantly about 33 percent higher Oxygen Radical Absorbance Capacity (ORAC) values, making them better at preventing chemical oxidation that leads to cellular damage. Research also indicates a link between organic practices and higher levels of beneficial conjugated linoleic fatty acids in dairy products. In addition, health-promoting flavonoids present in organic tomatoes was nearly double that of their conventional equivalents.
To help communicate these benefits, The Organic Center plays an important role by preparing State of the Science reports to summarize findings from peer-reviewed articles about organic research.
Favorable research is also emerging concerning the relationship between organic agricultural practices and the environment. A study published in the July 2007 issue of Agricultural Research demonstrated that organic farming practices are more effective in building soil organic matter than conventional, no-till farming practices. More recently, the Rodale Institute published a paper showing that organic farming systems sequester carbon in the soil and significantly reverse the effects of global warming.
Opportunities: New Farm Bill, Consumer Education
Supportive Organizations
In addition to the Organic Center, several other organizations have supported the efforts of organic since the early days. The Organic Farming Research Foundation (OFRF) serves an important role in research initiatives for organic agriculture. OFRF, along with OTA were also key in pushing the new Farm Bill through to provide funding for organic research, marketing and domestic supply. OTA has been pivotal in organic standards and market development, and has also established the HowToGoORganic.com to encourage further domestic supply. In addition, the Organic Materials Review Institute (OMRI) provides organic certifiers, growers, manufacturers and suppliers with an independent review of products intended for use in certified organic production, handling, and processing. On the organic cotton forefront, Organic Exchange offers research and advocacy. Internationally, International Federation of Organic Agriculture Movements (IFOAM) is working to bring together the global organic industry.
Weaknesses: Limited Agricultural Data • Opportunities: New Farm Bill
WEAKNESS
While organic has many strengths, it’s important to realize that the program in the NOP, at only six years old, is still young and thus still has room for improvement. When asked what were the biggest weaknesses, (or areas to improve) interviewees offered several suggestions ranging from regulatory issues to challenges with the consumer’s understanding of organic.
Consumer Confusion
As a 2006 Hartman Group survey of consumer attitudes and behavior points out, “Awareness does not necessarily translate into understanding.” While 27 percent of respondents thought that the label was reserved for “totally organic products,” 43 percent admitted that they didn’t know the label’s meaning. Even among core organic consumers, only 24 percent knew the correct meaning of the “USDA Organic” label.
The Hartman Group’s “Organic 2008: Topline Insights” study found little progress on this front. In this study, consumers identified “pesticide-free” and “hormone-free” among their top considerations (48 percent and 35 percent, respectively) in buying products. Given that U.S. organic products are, by definition, produced without the use of toxic and persistent pesticides and synthetic hormones, one would think the phrase “organic” would be considered equally as important. However, only 15 percent of those surveyed identified organic as important to their purchasing decisions, suggesting a disconnect in consumers’ minds between the term organic and its defining features.
One of the most frequently reasons cited for consumer confusion is the use of technical language to define organic. Consumers do not easily understand terms such “certification” and “accreditation,” and often fail to connect with these terms on an emotional level.
“Technical information about organic can be off-putting for some consumers, particularly now, when people do not always have time to digest the wealth of technical information that is available to them,” according to Samantha Cabaluna, director of communications at Earthbound Farm. However, some progress has been made.
“We [the organic industry] have become much better about both identifying and communicating what consumers want and need to know about organic. We at Earthbound Farm know, for example, that some consumers are more interested in the technical side of organic than others, so we work hard to ensure that different levels of information are available to them. That way, we not only satisfy the needs and desires of consumers interested in the basics, but also those who want to know more.”
Thus, more work is needed to create industry-wide messages that are appealing to and well understood by consumers.
Threats: Competing Labels, Opposing Voices
Opportunities: Consumer Education, Emerging Science
Lack of Regulation in Emerging Categories
Another reason for this confusion may be the lack of well-defined standards within newer categories of organic. Although standards for organic foods are relatively well defined, those for such sectors as personal care products, aquaculture and pet food are still under development, with much debate on how to shape such standards. Standards like the Global Organic Textile Standards (GOTS) for textiles, and NSF and Oasis standards for personal care are making headway, but are still voluntary and many companies in these emerging categories are using the word “organic” without any sort of official verification.
Uncertainty and debate are natural parts of the evolution of the organic industry, and therefore should not necessarily be seen as weaknesses, according to Katherine DiMatteo, Senior Associate at Wolf, DiMatteo + Associates and newly elected IFOAM World Board president. On the contrary, she sees the deliberative nature of standards development as one of the organic industry’s strengths.
It took many years of discussion and debate before OFPA went into effect, so it only makes sense that the process of devising standards for other sectors of the organic industry is an intense and time-consuming one as well,” she said. “Organic is a thoroughly scrutinized industry, involving a large number of stakeholders. This means that decisions sometimes take longer to make, but it also means that the decisions that are made have been carefully thought through.” Still, she acknowledged, the absence of standards in emerging sectors may create frustration for those producing, buying and selling particular types of organic products.
Strengths: Consumer Demand • Opportunities: Consumer Education
Price Barrier
Yet another obstacle is the price of organic goods. According to studies conducted by the Natural Marketing Institute, including the Health and Wellness Trends Database, the LOHAS (Lifestyles Of Health And Sustainability) Consumer Trends Database, the “Evolution of Personal Care Study”, “HealthBeat Interactive,” and NMI’s Product Attribute Trend Identifier (PATI), along with qualitative insights from NMI in-depth interviews, nearly three quarters of consumers feel that organic foods are too costly.
Often the prices for organic products are somewhat higher than for non-organic counterparts. Most of us in the industry know that there are a variety of reasons for this. For example, organic farming faces stricter regulations than do conventional practices, and thus such farming tends to be more labor and management intensive. Because it tends to be done on a smaller scale than conventional farming, organic farmers often pay more per acre to produce and to distribute many of their products. Moreover, historically organic farmers have not had access to the same government subsidies as non-organic counterparts, which has meant price tags on organic products reflect real, rather than subsidized, production costs. Additionally, increased demand for biofuels, rising fuel and freight costs, shifts in the stock market from funds to agricultural commodities, and a decline in the purchasing power of the dollar are driving up prices for organic and conventional foods alike.
The challenge is to educate consumers about the true costs and values associated with organic products. Thus, many see the need to address the price issue and better communicate to consumers the value proposition for organic goods.
Strengths: Consumer Demand • Threats: Domestic Supply, Global Trade Barriers
Opportunities: Price Gap Closing, Consumer Education
Limited Agricultural Data
An additional issue is the dearth of technical research on organic agricultural practices. Although agrochemical companies have funded research at land-grant universities for many years, universities and research centers have had little funding for research on organic agriculture.
Despite the lack of financial support for organic agricultural research, a number of universities now offer degree and certificate programs in organic agriculture. Also, with a dramatic increase in organic research-related funding provided in the 2008 Farm Bill, there is reason for optimism. However, an increase in funding may not be sufficient to compare with the work funded by large chemical companies and to overcome structural barriers that exist to communicating up-to-date technical information on organic to those who need it.
Strengths: Supportive Organizations • Opportunities: New Farm Bill
THREATS
Threats are defined as external conditions that could damage performance or growth. While these things may be out of the organic industry’s control, it is wise to be aware of these threats and take steps to minimize any possible negative effects. Interviewees mentioned threats ranging from global trade and supply issues to competing eco-claims and orchestrated attacks from biotech companies.
Competing Labels
With the rise of shoppers interested in buying “green,” it seems like new eco-labels, or other ethically driven labels, are popping up everyday. As a result, consumers are suffering from an information and product choice overload. This situation has the potential to result in “consumer shutdown,” whereby even consumers known to have a strong desire for and tolerance of information feel overwhelmed and lose interest in distinguishing between different products. In this context, organic risks becoming just another label.
A similar type of threat can be seen in the competition between organic and local products. The organic industry thus needs to work harder to both educate consumers about the unique benefits that purchasing organic products has to offer and to communicate that organic and local are in many ways compatible in their goals to promote a sustainable food system.
Strengths: Organic Legislation • Weaknesses: Consumer Confusion
Opportunities: Consumer Education
Domestic Supply
A more urgent concern is the gap between the domestic supply and demand for organic goods. Demand continues to outpace supply, and many domestic suppliers are struggling to keep up. This is due, in large measure, to the shortage of organic raw materials—a problem that has persistently hindered the growth of the organic industry and has yet to be effectively resolved.
Domestic manufacturers and retailers have thus been forced to reach out to foreign sources to meet consumer demand. In so doing, they have created conditions of dependency, which could hinder the expansion of the domestic organic industry. Also, some consumers are reluctant to purchase imported products, particularly as they question food safety oversight in some countries.
Strengths: Consumer Demand, Supportive Organizations
Weaknesses: Limited Agricultural Data • Opportunities: New Farm Bill
Global Trade Barriers
With varying languages and governmental import/export regulations, global trade can be confusing enough, but add in a variety of organic standards that differ (and often conflict) from one part of the world to the next, and global trade becomes even more challenging.
Currently, the NOP has established recognition with 8 countries, allowing these governments to accredit NOP certifiers in their country, thereby increasing the amount of USDA Certified Organic supply coming from these areas. However, this is still a far cry from equivalency or harmonization, which would allow producers to use supply which is certified organic to other global standards with equivalent regulations to the United States, to be used in USDA Organic products, and vice versa.
As OTA in Canada Managing Director Matt Holmes explains, “Many problems have cropped up because of technical differences that exist between the United States and Canada with respect to organic. The end products are for all intents and purposes the same, but the fact that they are created according to different sets of standards has emerged as a sticking point in bilateral trade.”
Given that the organic industry is facing a global supply shortage, such “sticking points” are particularly problematic. As Holmes points out, “Now more than ever there needs to be a focus on achieving international equivalency in order to ensure much-needed free trade of organic goods.” Without it, he says, the global supply crunch is likely to impede the continued growth of the organic industry.
Strengths: Supportive Organizations
Growth of Biotech
Yet another issue is the widespread growth and influence of biotechnology companies that manufacture products such as growth hormones and genetically modified (GM) seed. Through orchestrated attacks to bury the benefits of organic, efforts to reposition themselves as sustainable and compatible with organic, and growing risks GM contamination in organic, biotech poses several threats to the organic industry
On the national level, Monsanto spent $1.28 million on federal lobbying activity during the first quarter of 2008. In addition to lobbying for biotechnology acceptance, Monsanto lobbied on such issues as organic standards/National Organic Program, national milk labeling, and seed piracy.
Meanwhile, Monsanto has launched a state-by-state campaign challenging dairy farmers’ and dairy processors’ rights to tell consumers that their products are produced without the use of synthetic growth hormones such as recombinant Bovine Growth Hormone derived from genetic engineering.
In the latest development concerning this issue, OTA on June 30 filed a complaint in Federal District Court against Ohio’s Director of Agriculture, Robert J. Boggs, in an attempt to protect the rights of consumers to receive truthful information on organic dairy product labels and to protect the rights of organic dairy farmers and processors to communicate truthfully about federally regulated organic production practices.
It is likely to be some time before the final outcome of this lawsuit is known. However, Monsanto’s attack on organic milk labeling has forced the industry to fight similar battles in many states simultaneously, putting a drain on industry resources. The issues at stake, however, are monumental, focusing on the whole industry’s ability to truthfully communicate the attributes of its products and production practices, including common absence claims.
Meanwhile, genetically modified organisms (GMOs) from GM crops are
showing up where they were never used. Contamination is a real threat, particularly in crops that easily cross-pollinate, such as canola and corn (which now represented over 73 percent of U.S. corn crops). Recent research conducted at Lund University in Sweden found that genetically engineered crops can remain in the soil for ten years, in spite of efforts to eradicate them. Following up on trials conducted in 1995, in which an oilseed rape crop was genetically altered, the research found that plants spawned from the altered crops persisted ten years after the original trials took place. The Non-GMO project, a non-profit started by several industry leaders, offers education as well as testing and a working standard to GMO prevent contamination.
Strengths: Supportive Organizations • Weaknesses: Consumer Confusion
Opportunities: Consumer Education, Environmental Leadership
Opposing Voices
The organic industry is also at risk due to the many opposing voices that stir up controversy in the media and thus spread consumer confusion on issues such as organic regulation and compliance. To a certain extent, these “industry watchdogs” serve as a conscience as they offer alternative perspectives that help prevent the industry from becoming stagnant or out-of-touch. The fact remains, however, these voices, at times, have been damaging and counterproductive to the industry as a whole.
Speaking at The Organic Summit in June 2008, Julia Sabin, OTA’s current president, noted that there are distinct benefits that arise from the diverse constituencies making up the organic industry. “It is important to see our differences of perspectives as patches in the quilt that is the organic community, with each square reflecting its unique perspective but ultimately harmonizing in a shared objective and core values,” Sabin said.
Still, opposition is not likely to end anytime soon, meaning that the organic industry as a whole is likely to continue to contend with the challenges it creates.
Weaknesses: Consumer Confusion • Opportunities: Consumer Education
OPPORTUNITIES
Lastly, interviewees were asked what they thought were the biggest opportunities that the organic industry could take advantage of to help further future growth. Answers included funding provided by the 2008 Farm Bill, environmental leadership and consumer education as well as evidence that indicates the closing of the price gap between conventional and organic products.
The New Farm Bill
The recent passage of the 2008 Farm Bill contains provisions to enhance organic agricultural development and processing. Increasing mandatory expenditures on organic agriculture and programs to approximately $112 million over the course of its five-year life, the Bill represents a five-fold increase over federal funding provided in the 2002 Farm Bill. Its specific provisions include $78 million over five years to increase funding for organic research that will bring new technical, scientific and marketing analysis to farmers and processors; $22 million to aid organic farmers in financing the cost of conversion; and $5 million in mandatory funding, plus up to $5 million per year in appropriations, for USDA to collect and distribute price reports for organic agricultural products, to conduct surveys and publish reports relating to organic production, including consumer purchasing patterns, and to provide statistical analysis on organic agricultural products. Collectively, these provisions create incredible potential for all realms of the organic industry to grow and develop.
Also included is expanded funding for the National Organic Program to ensure appropriate enforcement and accreditation, as well as oversight of international production. By 2012, the authorized funding for this program will be $11 million.
The membership of OTA, OTA’s Board and staff and other organic organizations, particularly the Organic Farming Research Foundation, worked tirelessly for the inclusion of these organic provisions.
Weaknesses: Consumer Confusion, Price Barrier, Limited Agricultural Data
Threats: Domestic Supply
Environmental Leadership
Organic agriculture is the pioneer of the sustainability movement and now with all things “green” being a big trend, organic companies have the opportunity to position themselves as eco-leaders on all levels. Although environmental benefits have consistently been ranked among the lowest sources of motivation behind consumer’s decision to purchase organic products, Elizabeth Frey, vice president of Frey Vineyards, believes consumers do, indeed, consider the environmental impact of their purchasing decisions.
“When we host wine tastings or tours, people always express interest in the environmental side of our business. They want to hear about the steps we are taking to become more sustainable, which includes the steps we are taking to produce wine organically.” Thus, Frey advocates for more work to be done to increase consumer awareness of the environmental benefits of organic.
“Organic has come a long way when it comes to educating consumers about the basics of organic. Now we have the opportunity to go one step further and educate them about the environmental side of organic, which, from our experience, they are both interested in and excited about.”
Don’t just stop with sustainable agriculture though. Being an environmental leader means being as green as possible on all realms—from eco-friendly packaging to efforts to lower your company’s carbon footprint.
Weakness: Consumer Confusion • Threats: Competing Labels, Growth of Biotech
Price Gap Closing
Further opportunities for growth within the organic marketplace exist thanks to the declining price gap between organic and non-organic products as measured by SPINS scans data. The drop in this gap can be attributed to three factors: 1) at present, non-organic food prices are rising relatively faster than their organic equivalents due to heavier dependence on fossil fuels and historic ability to rely on government subsidies to keep their prices artificially low; 2) organic products are becoming widely available in large-scale retail channels, and are consequently being offered at lower prices than in the past; and 3) lower-priced private label products are assuming a prominent role in the organic marketplace, creating additional downward pressure on the existing organic/non-organic price gap. Together, these factors create conditions under which consumers’ purchasing decisions will be driven by issues other than cost.
Weakness: Price Barrier
Consumer Education
Opportunities to correct misinformation and educate consumers about organic are likely to increase as well. Because it will have greater access to marketing-related resources, the industry will have an enhanced ability to be proactive in its messaging strategies. This will help to ensure that the information released about organic is timely and accurate, and also help to create conditions under which consumers can make informed choices about the items they purchase.
With the explosion of web 2.0 technologies, blogs and social media, the industry can now stimulate and engage online conversation about organic agriculture and products, either by responding to misinformation or proactively communicating about the benefits of organic agriculture. In so doing, the industry has the opportunity to elevate the emotional appeal of organic. By presenting a itself as not only trustworthy, but also aligned with the fundamental values associated with providing the ‘best’ for families, organic can establish itself as both the gold standard of eco-labels and production and processing systems and a cornerstone of responsible citizenship.
Threats: Opposing Voices, Biotech Growth
Conclusions
After hearing from many industry stakeholders, several observations can be made. We can build on our strengths as an industry, our legal standing and our verifiable label as well as strong consumer support as we actively respond to misinformation about organic agriculture and products. We can also actively neutralize our weaknesses by communicating with one, succinct voice what organic is in a manner that reaches consumers on a personal level. Healthy, sustainable industries focus on innovation to stay relevant and thriving, and organic is no different. Innovation and research will also be needed to keep the industry healthy, whether by exploring market trends or new agricultural production methods that allow entry into markets with new national regulations.
The industry must also take seriously any attacks that threaten the foundation of organic production. Internal industry attacks waste time and resources. Thus, the industry must find constructive solutions to move past old debates so that it may focus on the greater threat looming from the biotechnology sector. Additionally, the organic industry must be prepared to articulate its position on genetic engineering in agriculture. At the same time, it must not allow its opponents to define the organic sector as anti-technology or anti-farmer, because neither is true.
While the potential exists for adverse events to take place, agenda-driven attacks are the biggest long-term threat to the organic industry, requiring the organic industry to develop effective crisis management strategies.
We must also work to turn the gap in supply of organic raw materials from a weakness to a strength by seeking to achieve consistent conversion of acreage into organic production worldwide.
Laura Batcha was hired in January 2008 as the Organic Trade Association’s director of marketing and public relations to improve and expand the scope of the association’s outreach and communication efforts. She has owned and operated an organic herbal products business and has held various leadership positions at Tom’s of Maine, Inc. in the areas of product development, marketing, business development and her most recent role as director of grassroots strategy and development. She lives with her family on a small working organic vegetable farm (CSA) in southern Vermont. You can reach her at lbatcha@ota.com.
